Short-term thinking, long-term problems

Commentary: When it comes to economy, take first things first

WASHINGTON (MarketWatch) — Our economic problems are so vast and so deep, that it’s hard to know what to tackle first.

We’re in danger of getting the sequence out of order, simply because we don’t explicitly recognize that some of our problems are acute and should be dealt with immediately, while others are chronic and can be put on the back burner, at least temporarily.

Most everyone has the same to-do list: We’d like to bring the unemployment rate down quickly, get housing prices to settle, pay off our debts, and help the economy evolve into one that can compete globally in the 21st century.

Some of those worthy goals are in conflict, in the short run. Fixing one can make others worse, at least temporarily. Paying off debts now, for instance, depresses the economy and keeps the unemployment rate high. But if we bring down the unemployment rate first, it’ll be easier to pay off our debts later.

By focusing on immediate problems, longer-term issues are often never dealt with, as we bounce from crisis to complacency and back to crisis. Our brains and our institutions are prone to delay, denial and procrastination. We’ve evolved to put survival above procreation. Our economic and financial systems have evolved to reward short-term thinking.

It takes effort to deal with chronic problems with the urgency they demand, in part because we can’t be sure we’ll be around long enough to benefit from the solutions. Why eat better today if you know you might get hit by a bus tomorrow? It’s human nature to delay the sacrifices. Ignore it and it’ll go away.

Now, there are some people who think that the long-term, chronic problems should be solved first. Being willing to tackle the tough issues proves they are Serious People made of sterner stuff. It shows more resolve, more maturity. It’s what Sharron Angle was talking about when she told Harry Reid to “man up.” What they don’t tell you is that it’s easy to be a Serious Person if others make the sacrifices.

Enough philosophy. Let’s get practical. What are our most pressing problems?

Short-term problems

• Put America back to work. Too many Americans are unemployed, or underemployed. There are nearly 15 million people looking for work, and millions more are working reduced hours or have simply given up on getting a job. This is a tragedy for millions of families and for our country. We have idle resources, and we have unmet needs. All we lack is the will to put them to work.

• Fix family finances. Household debt has gone from a long-term chronic problem to an acute emergency that must be addressed now. American families have lived beyond their means for decades. Millions have lost their homes, and millions owe too much on their credit cards. Not every family has debt problems, but far too many do. Savings have been devastated by the recession, so many people are spending less in attempt to build up their nest egg for retirement, college and other big expenses. It’ll take years to restore financial health.

• Fix the housing market. Home prices are still too high to be affordable. About a quarter of homeowners owe more on their house than it’s worth. Efforts to prop up prices have failed. It’s past time for borrowers and lenders alike to recognize the serious errors they made and mark these loans to reality. It’ll be painful, but it’s better to rip the Band-Aid off than to let this drag on for another five or 10 years.

Long-term problems

• Restructure the economy. We got too much Wall Street, not enough Detroit. We’ve become great at manufacturing toxic financial products, while our industrial base has atrophied. Reversing these trends will take years, if not decades. We need to rethink the incentives that government gives American corporations to hollow out our country. If we want to remain one of the more productive economies in the world, we’ll have to invest in our people, our ideas and our physical infrastructure. And we’ll have to play hard ball with our trading “partners.”

• Retool government. Government has been captured by lobbyists for corporate and other special interests, so it does lots of insane things that it should stop doing. At the same time, we’ve asked it to do more than we are willing to pay for. Contrary to some alarmists, the public debt isn’t an immediate crisis, but it is a problem in the longer run. The issues aren’t insurmountable if we can get the economy healthy again. And we don’t need to renege on the promises we’ve made to hundreds of millions of workers that they’ll have a secure retirement.

Solving our fiscal problems while we still have so much unemployment is impossible. Growth has to come first.

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